Which of the Following Assumptions of the Classical Model Is

question 34

Multiple Choice

Which of the following assumptions of the classical model is the best reason we cannot use it to explain short-run economic fluctuations?

• A) Markets never clear in the long run.
• B) The labor market clears.
• C) Prices remain constant and supply and demand adjust.
• D) It does not show how an economy recovers from a recession.
• E) Government intervention is essential to get markets to clear.

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Definitions:

Period Costs

Expenses that are not directly tied to the production process and are instead charged to the periods in which they are incurred, such as sales and administration expenses.

Work in Process Inventory

Work in process inventory consists of goods partially completed, not yet ready for sale, representing the cost of raw materials, labor, and overhead involved in production.

Direct Materials

Raw materials that can be directly attributed to the production of goods.

Direct Labor

The wages and related expenses for employees who are directly involved in the production of goods or services.